Stocks go up and stocks go down. A financial expert will tell you to invest long term because historically, stocks have always — always — eventually gone up after a downturn.
But here’s Asia Times and PJ Media columnist David Goldman on Facebook today.
The Dow is now down another 8.5%,bringing the peak-to-trough decline to nearly 30%. The mother of all margin calls is going out through world markets. Asian and European investors are liquidating safe US assets, e.g. mortgage-backed securities with a government guarantee, because European banks are losing access to dollar credit. US corporations are drawing down all their available credit lines and every levered fund in the world is selling whatever it can. This is a crisis and has the potential to spin out of control–although central banks are already taking action, including the ECB this morning. Expect a lot more emergency measures.
Trump’s speech last night is a resounding failure. There was nothing specific on what the market needed to hear–emergency payroll tax cuts and business loans. He tried to blame the problem on Europe, and he isn’t fooling anyone. The travel ban is adding to financial panic.
Yes, it’s a full-blown panic. We’ve been hearing warnings for years that a day like this was coming. Is the Fed up to the challenge? Is the political establishment prepared? We should hope so.
During the subprime mortgage collapse, the Fed pumped trillions into the short-term economy. Does the Fed have that kind of slack today where they can provide that kind of immediate stimulus? It better.
U.S. stocks fell sharply once again on Thursday after an address from President Donald Trump failed to quell concerns over the possible economic slowdown from the coronavirus.
The S&P 500 traded down 6.5% after trading was paused due to a 15-minute “circuit breaker,” which temporarily halts trading at the New York Stock Exchange and Nasdaq. The broad index also joined the Dow Jones Industrial Average in bear market territory. The 30-stock Dow slid more than 1,700 points, or 7.3%. The Nasdaq Composite dropped 6%.
Before the open, futures contracts tied to the major indexes fell to their so-called limit down thresholds, sliding 5%. These limit down levels act as a floor for selling until regular trading begins.
Bargain hunters will begin to take their pick of the losers, which will temporarily halt the slide. But it’s clear that for the money men, Trump’s speech fell flat.
This financial panic will subside once the economic effects of the coronavirus pandemic become clearer. There are so many unknowns now that investors are playing it safe, waiting for the outlines of the problem to take shape. Traders are responding to the uncertainty, not necessarily to what’s actually happening in the White House, in Congress, or in capitals around the world.
What the markets will look like when the dust begins to settle will be vastly different than how it appears today.